El Salvador Financial Sector Assessment Program Update : Capital Market Development

The capital markets in Salvador are small and relatively underdeveloped, and have played a very limited role in the economy. On average, institutional investors invest less than 10 percent of their total assets in capital market instruments. In 200...

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Bibliographic Details
Main Authors:	International Monetary Fund, World Bank
Format:	Report
Language:	English en_US
Published:	Washington, DC 2017
Subjects:	ACCOUNTING ARBITRAGE ASSET-BACKED SECURITIES AUCTION AUCTIONS BALANCE SHEET BANK ASSETS BANK DEPOSITS BANKING ASSETS BANKING REGULATIONS BANKING SECTOR BOND INSTRUMENTS BOND MARKETS BOOK ENTRY BOOK-ENTRY BORROWING COSTS BROKERAGE BROKERAGE FIRM BROKERAGE FIRMS BROKERAGE HOUSE BROKERAGE HOUSES BROKERAGES BROKERS CAPITAL MARKET CAPITAL MARKET DEVELOPMENT CAPITAL MARKETS CENTRAL BANK CENTRAL BANKS CENTRAL DEPOSITORY COLLECTIVE INVESTMENT COMMERCIAL CODE COMMON TRADING PLATFORM COMPARABLE MATURITY CONFLICTS OF INTEREST CONSUMER PROTECTION CORPORATE BOND CORPORATE BOND ISSUES CORPORATE BOND MARKET CORPORATE BOND MARKET DEVELOPMENT CORPORATE BONDS CORPORATE GOVERNANCE COUPON DEBT CONTRACT DEBT INSTRUMENTS DEBT ISSUERS DEBT MARKET CONSTRAINTS DEBT MARKET DEVELOPMENT DEBT SECURITIES DEBT TRANSACTION DEBT TRANSACTIONS DECENTRALIZATION DEMAND FOR BOND DEPOSIT DEPOSIT LIABILITIES DEPOSITS DEVELOPMENT BANK DISCLOSURE REQUIREMENTS DOMESTIC BANKS DOMESTIC DEBT DOMESTIC DEBT MARKET DOMESTIC GOVERNMENT BONDS DOMESTIC INSTITUTIONAL INVESTORS DOMESTIC MARKET DOMESTIC SECURITIES EMERGING MARKETS EQUITY ISSUANCE EQUITY MARKET EQUITY MARKETS EURO MARKET EXPENDITURE EXTERNAL DEBT FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL SYSTEMS FISCAL POLICY FIXED INCOME FIXED INCOME MARKET FOREIGN DEBT FOREIGN EXCHANGES FOREIGN INSTRUMENTS FOREIGN INVESTMENT FUND MANAGEMENT FUND MANAGERS GOVERNANCE STANDARDS GOVERNMENT BONDS GOVERNMENT FINANCING GOVERNMENT INTERVENTION GOVERNMENT REVENUES GOVERNMENT SECURITIES GOVERNMENT SECURITIES MARKET GROSS DOMESTIC PRODUCT GROSS SETTLEMENT SYSTEM HOLDING HOLDINGS INDEBTEDNESS INITIAL PUBLIC OFFERING INITIAL PUBLIC OFFERINGS INSTITUTIONAL INVESTORS INSURANCE INSURANCE COMPANIES INSURANCE COMPANY INSURANCE PREMIUMS INTERNATIONAL BANK INTERNATIONAL MARKETS INTERNATIONAL STANDARDS INVESTING INVESTMENT FUND INVESTMENT FUNDS INVESTMENT GUIDELINES INVESTMENT STRATEGIES INVESTMENT VEHICLES INVESTOR BASE IPO ISSUANCE ISSUANCES JOINT STOCK COMPANIES LEGAL FRAMEWORK LEVEL PLAYING FIELD LIQUIDATION LIQUIDITY LIQUIDITY MANAGEMENT LOAN LOCAL CAPITAL MARKET LOCAL DEBT LOCAL DEBT MARKET LOCAL MARKET LONG- TERM YIELD MARKET FRAGMENTATION MARKET INFRASTRUCTURE MARKET INSTRUMENT MARKET INSTRUMENTS MARKET INTEGRATION MARKET INTERMEDIARIES MARKET SIZE MATURITIES MATURITY MONETARY FUND MONETARY POLICY MUTUAL FUND MUTUAL FUND ASSETS MUTUAL FUND INDUSTRY MUTUAL FUNDS OUTSTANDING CORPORATE BOND OWNERSHIP STRUCTURE PENSION PENSION FUND PENSION FUND ASSETS PENSION FUNDS PENSION SYSTEM PENSIONS PORTFOLIO PORTFOLIO MANAGEMENT PORTFOLIOS PRICE DISCOVERY PRIMARY MARKET PRINCIPAL PAYMENTS PRIVATE DEBT PRIVATE DEBT MARKETS PRIVATE PLACEMENTS PRIVATE SECTOR DEVELOPMENT PUBLIC DEBT PUBLIC DEBT MANAGEMENT PUBLIC DEBT MARKET PUBLIC DEBT MARKETS PUBLIC DEBT SECURITIES PUBLIC PENSION REAL TIME GROSS SETTLEMENT REGIONAL INTEGRATION REGISTRATION PROCESS REGISTRATION PROCESSES REGULATORY FRAMEWORK REGULATORY FRAMEWORKS REGULATORY STRUCTURE REMITTANCES REPO REPO MARKETS REPO TRANSACTIONS RESERVES SECONDARY MARKET SECONDARY MARKET TRANSACTIONS SECURITIES SECURITIES EXCHANGE SECURITIES EXCHANGES SECURITIES LAW SECURITIES MARKET SECURITIES MARKETS SETTLEMENT SETTLEMENT INFRASTRUCTURE SETTLEMENT SYSTEMS SHAREHOLDERS SMALL INVESTORS SOVEREIGN YIELD STOCK EXCHANGE STOCK EXCHANGES STOCK MARKET STOCK MARKET CAPITALIZATION STOCKS T-BILL TAX TAX REGIME TRADING TRADING SYSTEMS TRANSPARENCY TREASURY TREASURY BILLS TREASURY CREDIT TRUST FUND TRUST FUNDS TURNOVER UNIFORM-PRICE VALUATION VALUATION OF SECURITIES YIELD CURVE
Online Access:	http://documents.worldbank.org/curated/en/617371468248386515/El-Salvador-Capital-market-development-technical-note http://hdl.handle.net/10986/27735

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Summary:	The capital markets in Salvador are small and relatively underdeveloped, and have played a very limited role in the economy. On average, institutional investors invest less than 10 percent of their total assets in capital market instruments. In 2009, there were only five new issuances of corporate bonds and three in the case of equity. Banks and pension funds are the main institutional investors. The current market architecture and the natural monopoly it grants to the exchange hamper market development and prevent the modernization of the regulatory framework. There is an urgent need to overhaul of the regulatory framework to promote sound market development in the short-to-medium term. The regulatory framework should guarantee a level playing field between bonds and bank deposits, which should be reflected in the investment guidelines for institutional investors. The exchange should reposition itself to become more competitive and strategic at the local and regional level. The investment funds law should be finally approved to broaden and diversify the investor base. The importance of this reform is paramount as the current reliance on just two main institutional investors (banks and pension funds), with investment limitations (35 percent each per issue), creates a major limitation for new issuances. In the medium -to long- run, it is recommended to explore gradually integrating the individual markets at the regional level. This paper is divided into following four parts: part one gives current market situation; part two gives regulatory and supervisory framework; part three gives recommendations; and part four is reference section.

El Salvador Financial Sector Assessment Program Update : Capital Market Development

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